Term
| Jack receives 30k in cash for services provided to clients. One client gives him a car worth 10k for the services Jack provided. He found a rare coin worth 2k. He wins 50k a year for 20 years in the lottery. He gets 3k from dividends and interest on investments. he receives 5k from the bar association for winning outstanding lawyer of the year. What are the tax consequences of each? |
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Definition
Car: (income received in kind)
Coin: (income includes windfalls)
lottery winnings:
Dividends and Interest:
Bar Award: |
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Term
| Mary receives 3k cash bonus from her employer last year. This year she has to repay it because it was a mistake. How do you treat it each year? |
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Definition
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Term
| Susan earns 2k from painting Ray's house, but has Ray pay off a debt to Larry instead. Is this part of her gross Income? |
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Definition
| Yes, income is taxable to the person who earns it. |
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Term
| Susan earns 2k in dividends and stocks in 2011, but assigns her right to collect to Larry for a debt. Is this part of her gross income? |
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Definition
| Yes, income from property is taxable to the person who owns the property. |
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Term
| in 2009 Louis purchases land for 20k, as an investment. He resells it in 2011 for 50k. Is there gross income? |
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Definition
| Yes, gains from the sale of property are included in income. |
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Term
| How do you compute gain from the sale of property? |
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Definition
| Gain = Sale Price - the seller's basis in the property. |
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Term
| If Louis puts his land he bought in 2009 up for sale in 2010, but he doesn't sell it until 2011, when is the tax on his gain? |
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Definition
| in 2011, gain from property is only taxed when it is realized. |
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Term
| Joe graduates law school and his aunt gives him a watch worth 30k. (Last year the aunt bought the watch for 4k). His uncle also dies, and he is given his uncle's house worth 500k (uncle bought for 50k years ago). What part is included in gross income? |
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Definition
| None of it. Gifts, devises, bequests and inheritances are not included in gross income, unless it is for past services. |
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Term
| Joe sells his watch for 35k, which was given to him by his aunt when it was worth 30k. The aunt only had a basis of 4k when she bought it. What is his gain on the sale of the watch? |
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Definition
| 31k. Gifts keep their basis when given to a new owner. 35k sale price - 4k basis = 31k gain. |
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Term
| Joe's uncle also dies, and he is given his uncle's house worth 500k (uncle bought for 50k years ago). Joe sells it in 2011 for 570k. What is his gain on the sale? |
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Definition
| 70k. When a person receives property upon the death of anther, he takes it with a basis of the current full market value. |
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Term
| S is a business man, and in gratitude for tips about new customers, he gives B a Cadillac, taking the deduction as a business expense. Does B have income from the transaction? |
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Definition
| Yes, a gift is not taxable as income, but a gift must come from |
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Term
| Andy borrows 25k from Betty, with a note over 2 years bearing interest. How much is in Andy's Gross income? |
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Definition
| None. His net worth has not increased because he has an offsetting obligation to pay. |
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Term
| Andy owes Betty 25k, but Betty tears up the note and cancels the debt. How much income has Andy received? |
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Definition
| 25k. Discharge from debt increases Andy's wealth, it is taxable income. |
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Term
| Andy is insolvent and in bankruptcy. Betty decides to try and help him out by cancelling the debt Andy owes him. Is this taxable income? |
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Definition
| No, for public policy reasons, we don't kick people when they are down. |
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Term
| Andy buys property from Betty for 50k, 30k in cash and 20k in financing (debt). Betty later tears up the note. Is this 20k taxable income? |
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Definition
| No, we treat this as a reduction in the price of property from 50k to 30k. |
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